How to Build Out Your SaaS Sales Development Function with Sam Blond, ex-CRO at Brex

Thank you so much for having me Team Saster. I am just thrilled to join any events that you all put together and just want to positively reinforce this idea that you are the best community in SaaS and just love working with you all. So thank you for having me once again and thank you for everybody that is attending today's session. Hopefully we'll have some fun and make it as productive as possible. Today we will be talking about how to build out an SDR function. Going to provide a bit of context before we get into how to actually build out an SDR function and the context is what we did at Brex and I will reference back to this periodically through the rest of the presentation, but I think it's helpful just level setting on how we approached building out sdr. Did a lot of things right, did a few things incorrectly that we'll, we'll talk about as well. We had six AES before we started hiring any SDRs and so I joined when there were two AES. I hired four additional AES and before we introduced SDR to the company as a function we had a heavy focus on AE Outbound and I think we established a baseline for successfully doing outbound with the existing salespeople before we invested in a dedicated SDR function. The first hire that we made after those six AES that was dedicated to SDR was a senior hire. Her name's Ashley Kelly. I'll reference her a few times in today's presentation as well. We also had a Saster podcast on CRO Confidential the other week that if this is an interesting topic, might be interesting to listen in when you have the time. We brought in Ashley as a senior director so as a leadership hire, as our first hire and then it was Ashley's job to take the existing successful Outbound process and improve upon it and specialize in the function of sdr. The first thing that she did after effectively being an SDR for several weeks was made three in network experienced hires to start. Ashley came from Lever before she joined Brexit and she hired three of her SDRs. Top performing SDRs from Lever, brought them into Brex and so then I think maybe two data points that are worth flagging there. These were already experienced SDRs as our first IC SDRs. And the second thing is they were in network hires that Ashley had brought with her. We scaled the team when the data supported it. I'm going to go there's a specific slide around scaling the team so I'll go much deeper around what I specifically mean by the data supporting it. And then on an incentives, from an incentive standpoint, we started with incentivizing opportunities. We called them squos Sales Qualified opportunities. And over time we moved that to revenue. When an opportunity closed and was generating revenue, if the SDR sourced it, they received credit on that revenue, but they no longer received revenue for creating the opportunities the way that they had. Backward looking. We'll spend some time on that as well. And then the last thing around what we did at Brexit on just providing some context here. From a results standpoint, 80% of Brex's revenue came from outbound, both AE and SDR. And that mix shifted over time. Of course, when we were six AES and no SDRs, 100% of our outbound revenue came from AE. And over time we actually got it to where on a per rep basis SDRs were generating more revenue than the AES. And so the makeup of that revenue shifted over time. But a large chunk of Rex's revenue came from sales outbound. Here is the agenda for how to build out an SDR function. We're going to start with the benefits of sdr. We won't spend a ton of time there because the saster audience is oftentimes very educated and experienced and probably obvious, but I think worth reading, reinforcing at least one point. We'll move on and try and do this sort of sequentially around how to build out an SDR function from where you start. For the folks that today haven't yet started all the way to folks who have many SDRs and are scaling that team. We're going to start with when to hire your first sdr. We'll move on to who to hire, things like profiles. We'll talk about how to measure performance. We will then talk about once you have these things in place, ready to scale the team, what are the indicators that you should go off of and how big should you make the team. And then we'll finish tactically on some trends that I am seeing in outbound, both as headwinds and then potential tailwinds. This world of outbound seems to be ever evolving and right now is at an inflection point, I think for two reasons. One is the introduction of AI that everybody seems to be interested in, and the second is the deceleration of what I will call just spray and pray outbound through cold email sequences. And so we'll talk a little bit about the trends that I'm seeing and maybe the direction that I see this space evolving to. Okay, benefits of SDR as I mentioned, I don't want to spend a lot of time here just because of the experience level of the audience. The obvious benefit is that SDRs increase demand which leads to more revenue and the business grows faster when you have a successful SDR organization in place. That's I think the obvious benefit. The less obvious benefit that is worth flagging is, and I'll allude to this example actually later in the presentation as well. There was a point in time when Rex AES were sourcing more revenue on a per REP basis than SDRs were and they were also closing that revenue and there was an internal push at the sort of executive level, both finance and founder. Why don't we just hire more AES? If they are both sourcing more revenue and they're also closing that revenue, shouldn't we just hire AES? What's the point of having STRs if they are less successful at this thing they're even specializing in? And the answer, or an answer doesn't show up on the spreadsheets when you look at things just like attribution of that revenue. But when you looked at the AES that were influencing the revenue that was being attributed to AE outbound, all of the top AES were former SDRs and none of those people exist at the company without the function of SDR existing as this sort of training ground to ultimately promote into some of the most successful AES within the business. Now we corrected this. We got it to a point where SDRs on a per app basis were sourcing more revenue than their AE counterparts. But that that benefit that I just alluded to, which is this sort of fear system is oftentimes overlooked and doesn't necessarily show up in the data. So with that let's continue along to when to hire your first sdr. One, I'll try and incorporate some stories and then two, I will try and not just describe what I think works, but also some mistakes that I observe folks making and I'm sure have made myself. Let's start with when to hire your first sdr. And a big mistake that I see here quite often is that founders and early sales reps really push to hire an SDR before the business is ready. And this can be in the form of the first go to market hire. So you're still doing founder led sales. You hire an SDR to help support the founder from a demand gen standpoint or you still have the founder as effectively the sales leader, Maybe a couple AES and those AES are pushing to hire an SDR to help supplement the demand Gen help supplement the OP Apple My experience is that is not the right approach and like with many things, this isn't necessarily one size fits all. I'm sure there are counter examples where this has worked, but based off of my experience, there are two things that I would solve for before I get into those two things. One really important caveat is that AES should do their own outbound and I believe that is true on day one and I believe that should be true in year 10. We had a podcast with Splunk CRO. There was a recent CRO Confidential. Their AES are still spending a bunch of their time doing their own outbound, sourcing their own opportunities and thinking about sort of roi. From a sales rep standpoint, the highest ROI thing salespeople can be doing is closing revenue. I think the second highest ROI sales thing salespeople can be doing is sourcing revenue. And we're going to talk about again the importance of having your AES do their own outbound, even if you have SDR later on in this presentation. And why again, that's so important. But now to solving for the two things that I would make sure are in place prior to hiring your first sdr. The first is that you have an existing outbound process that is working and that they can improve upon. And so you don't want to hire a junior SDR to come into an environment with no systems and no process and no track record of successfully sourcing outbound opportunities. If that's not in place, it's going to be very difficult for them to create that from scratch. The second thing that I would solve for is someone who can actively manage them in this environment that I described before. Sometimes you have a founder that is their direct manager. Sometimes you have salespeople, individual contributors. They're saying I will take on some of the burden of managing this sdr, but they're not really managers. And so I think my guidance here is don't introduce SDR until you have some success around outbound, some outbound process in place that is working. And then the second is that you want to have someone that can actively manage them, that generally can be a sales leader or it can be a dedicated SDR leader. If that's the if that's who you decide you want to make the first SDR hire, then up until that point just hire full cycle AES until these things exist. If you've got two AES you want more demand, just hire another AE and again, really reinforce the importance of AES doing their own outbound. If they can't do it, an SDR is not going to be able to do it, or at least isn't going to be able to be set up for success in doing it either. Okay, so we now have these things in place. We have some outbound successes under our belt and we have someone that will actively manage the SDRs, either a sales leader or an SDR leader. So let's talk a little bit about who we want to hire. As I mentioned at Brex, we hired a leader before we hired any individual contributor SDRs. In my experience, you can do that or you can hire two ICs, but those are the two paths that I would go down. I would either hire an SDR leader and I would probably go down that path if two things exist. One, if I know the person I want to hire, we were spoiled in that I knew Ashley. She was this exceptional SDR leader that we would be silly not to hire if we didn't have the opportunity to do. And then the second thing that existed is we knew we wanted to grow the team. We were already six successful AES. We knew we wanted to grow the SDR function quite rapidly and bringing in a leader made a lot of sense. If we were earlier, we probably would have gone down the path of just hiring two individual contributor SDRs and having them report directly to me. Me. If you do hire an SDR leader, I think the only caveat there is make sure that they are willing to do the individual contributor work. When Ashley came in, she effectively was an SDR before she brought on her in network hires. And you don't want a leader who isn't willing to, let's use some cliches, roll up their sleeves, get their hands dirty, those sorts of things, especially if they are your first SDR hire. Okay, Regardless of whether you hire a leader or an sdr, I think that there are a couple things to solve for in who you hire as your first SDRs. The first one SDRs are entry level salespeople, but some are more experienced than others and I think that your initial SDRs should have some experience. When I joined Echo Sign with Jason as an sdr, I was fortunate that I came in with something like four months of SDR experience from a prior role at a company called Intact. And having those four months of experience really allowed me to hit the ground running. I knew how the systems worked, I knew some feedback around the types of sequences that were more effective than others. And I think as with the first or one of the first SDRs. Without that experience, it would have been much more difficult for me to be successful in the role that I took on as an SDR at Echo Sign. Another version of this was when we hired Ashley Kelly at Zenefits as an individual contributor sdr. She mentioned this in the podcast the other week. She had came in for come in from a recruiting background. So she already had real world sales like experience, wanted to break into tech sales started as an sdr. I think the takeaway here with a couple examples, a couple of those examples is when you do hire your first SDRs, I would try to hire folks with some experience. I wouldn't hire the folks that are directly out of school. The second thing that comes to mind on who to hire is that I would start in network and the networks of your existing team. So at Rex, I hired Ashley, who was a close friend and I knew that she was an exceptional SDR Leader. The first three SDRs that she brought on were all SDRs that were in a prior organization that she had led. You also have the AES that you can leverage their networks. So if you've got a few successful AES in place, they all came with some experience. They probably remember who the best SDRs at their prior companies were and maybe had relationships with them where they were taking some of their opportunities. They can help source and recruit those initial SDRs. So on the who to hire for your first SDR cohort, one, hire two of them at the same time, two, solve for some experience and three, with sdr, even more so than other hires, you leverage personal networks. SDR hiring is so hard because you don't have a track record of experience to go off of the way that you do with account executives and sales leaders. SDRs are often. When I joined Echo Sign, I had four months of experience. I couldn't point to this track record of exceptional performance over long periods of time and great references from former managers. So again, this leveraging your network is particularly important with this category of hire that is definitionally less experienced. Okay, so we are now at the point where we've decided it's time to invest in sdr. We know who to hire and we've made those hires. Let's talk a little bit about how to measure the performance of the SDR organization and SDRs individually. There are two metrics that see most commonly used to measure performance. Those two metrics are opportunities. What we did at Brex, where we started was sales qualified opportunities. And so this is if you schedule a meeting, that meeting is held and it meets some qualification criteria. The SDR receives credit and maybe they have something like a 10 to 20 qualified opportunity monthly quota. And every time I schedule a new opportunity and it passes through, that's credit, I get one. And then the other most commonly used performance measurement that I see is revenue. And the way that I think about these things is related to quantity versus quality. The further up the funnel you go, the more you are solving for quantity of demand and the further down the funnel you go, culminating in revenue, you are shifting towards quality. And I think that that process that I just described is actually the sequencing with which I would approach measuring performance. When you hire or when I hire my first SDRs, almost universally I want to incentivize quantity. The constraint to growing faster is that we don't have enough opportunities in the funnel. The other thing that we don't have is any data around things like conversion rates by industry Persona, revenue contribution by different categories. And so we really want to cast a wide net when it comes to acquiring demos and opportunities. And the constraint here is a volume game. We want more opportunities created in pipeline and more demos on calendars. Over time, what starts to happen, and there are a couple things that are signals of this, but over time what starts to happen is you start to learn more about the business and the incentives aren't necessarily aligned with the business outcome that you are looking for. Couple examples here. You will hear things like this wasn't a good demo. The the sdr. The demo quality coming from SDR is low. You will hear examples of things like SDRs campaigning their AE counterparts to give them credit for demos that are on the fringe of whether or not they should count. And it's not going to be closed revenue, but the SDR still wants credit because they created the opportunity. When these things start to happen, my recommendation is it is at least worth going through the process of the thought exercise around should we introduce or shift to incentivizing closed revenue? In the way that I approach this decision is I tried to decide which incentive will ultimately generate the most revenue for the business. And intuitively you would think that incentivizing revenue would generate the most revenue from the business. That's actually not true on day one because SDRs then become more focused around how their opportunities are performing and you actually don't want that behavior. But over time, we learn a lot. We learn again which Personas are converting, which types of companies are converting, what a good demo looks like, how much revenue different types of opportunities will ultimately generate for the Business and shifting to further down the funnel metric like closed revenue I think can make a lot of sense. We're going to talk more about how Brex experienced this transition but hopefully that gives a bit of an overview on how to measure performance gravitate towards opportunity creation when SDR is first getting started and then really at least the thought exercise of shifting to closed revenue that is sourced from sdr. Okay, again following the sequence with which we would build out an SDR organization. We know when to hire, we know who to hire, we know how to measure performance. Now we may want to consider scaling the team and I want to talk a little bit about how I approach that. I was on a call with an SDR leader the other day and we were talking through how the and this was an NSDR leader in a lead poor environment. The folk which most of us are in the focus of the go to market organization was generating more demand. And I asked this leader what they recommend doing as the leader of demand gen and as the leader of sdr. And the first thing that they mentioned was I think our SDR to AE ratio is too low. Right now we have something like half an SDR to 0.75 SDR to AE and I think we should be more like 1 1/2 to 2 SDRs for every AE. And so I immediately gravitated towards and this team was not small, this team was a 20 to 30 person SDR organization. I immediately gravitated towards how effective is the existing team of 20 or 30? Let's forget about the ratio for a moment. What percentage of revenue is sourced from sdr? And on an efficiency or productivity basis how does that compare to our other channels? And the answer is something like conversion rates today are low of SDR sourced opportunities and the impact that we don't have is limited. But I attribute that to not having a high enough SDR to AE ratio. If we had more SDRs for every AE we would be contributing more revenue on an absolute basis and certainly on a per AE basis. And that is just the wrong way of approaching scaling the SDR team. So the first thing that I think is important is you need to know your numbers cold. So January just ended. We should know what our attribution in the month of January, both by new logos closed and by new revenue closed in the month of January, how much did SDR contribute? Both new logos and new revenue? If anything over time efficiency will decrease as you add to the team. So if you have a 20 person SDR team today, if you want to add 10 SDRs over the course of the first half of this year. Expect your per rep efficiency to decline as you increase the team size by 50%. So the takeaway here is that you should only scale when you are encouraged by the numbers. And if you are not encouraged by the numbers, you should focus on improving the numbers before you add to the team. I'm going to tell two quick stories about Brex and how we approached this that I think help emphasize this point and maybe reinforce some of the takeaways for folks in the audience. The first is that I alluded to this environment at Brex where the AES were closing more or sourcing more revenue on a per rep basis and than the SDRs were. And I talked with the SDR leader who is Ashley, about this problem and we could not continue scaling the SDR function when this dynamic existed. It didn't make sense to hire more SDRs when their AE counterparts were sourcing more revenue on the thing they were supposed to specialize in. So we tried to diagnose why this was happening. And the first thing to mention here is I mentioned earlier the importance of having AES do their own outbound. If that didn't exist at Rex, we would not have had this insight that AES were able to source more revenue than their SDR counterparts and we then would not have done. The follow on actions that I'm about to describe didn't greatly improved SDR efficiency and the growth of the business. So again, just underscoring the importance of having AES outbound. Otherwise we don't even have this insight to begin with that the AES are sourcing more revenue than the SDRs. Now, how we approached changing and improving that. Ashley at the time had a team of something like 15 SDRs. First, we wanted to make sure that this was the team that we felt confident in moving forward with. So we may have managed out a couple of the bottom performers, but we certainly weren't going to add to the team when we weren't happy with the effectiveness of the team. So we took the existing team, we probably shrunk it a little bit, and then we got back to why do we think this environment exists? And there were two outcomes that were produced from this exercise. The first is the AES knew what great looked like from an opportunity standpoint in ways that the SDRs didn't. The AES took these opportunities to close and so they knew the types of people and companies that were likely to convert and that were likely to generate a lot of revenue because they worked them far past the point of taking the initial meeting. And so the output or change that we made there was we got very sophisticated around lead scoring and we no longer allowed SDRs to just decide anyone in the universe that they wanted to bring into their named account list within Salesforce and start blasting those accounts. We were very prescriptive about which sub verticals within the industry, which Personas CFOs converted at a higher rate than controllers, which geographies. And we basically said SDRs, these accounts have the highest probability of converting to customers and they're going to generate the most revenue, go after them. The second thing that we did was we changed the incentive referencing back to the prior slide from sourced opportunities to closed revenue. And the combination of those two changes radically changed the SDR environment, both in terms of where SDRs were focused and then also aligning incentives with the business. And the result was that SDRs started closing or generating far more closed revenue than their AE counterparts. And backdrift to the point around scaling the team. I think the takeaway here is you have to understand your numbers and the attribution of how much revenue is being sourced from each channel. Do not invest in SDR hiring more SDRS if you aren't satisfied with the performance and the efficiency of the existing team. Adding more SDRS into that environment will only decrease efficiency. So if you're at a point where you brought in a bunch of new SDRs, the efficiency has declined a little bit. Take that existing team, make sure that they are successful, and until you're happy again with the data that is coming out of that environment, don't hire any more people and have that be a defined constraint to growing the team and use it as something that motivates both SDRS and the SDR leader in terms of reaching milestones where they can again start growing the team because of the success of the existing organization. I want to finish just on trends in outbound. I think that there is a narrative that from an outbound standpoint and within SDR as a function, we are moving away from spraying and praying outbound email sequences and that being the primary function and responsibility for an sdr. This approach is just losing efficacy. I think any leader in an organization is receiving countless outbound emails today from companies that they haven't heard of, sent by people they don't know, and most of the time they don't read them and they go into the archive or whatever. And I think that is somewhat consensus. I think what is less consensus is, okay, so what should we do. There's this trend that we can acknowledge is less effective. We're getting 1% reply rates, maybe.05% meeting rates. And efficiency is just gone off a cliff with at least this outbound email process. But we still want to do outbound. Here are the three things I have seen be effective in replacing this fray and pray outbound methodology. The first one is around leveraging networks and I think this comes in three flavors that I can think of. The first is personal. I remember when I joined Brex I probably sent Jason an email at Saster. It was like hey, I just joined Brex. I'd love for you to use us as your corporate card at Zaster. I'll get you an account set up, whatever you need, whatever else. And I think Jason was an awesome friend and did that. And that is an example just coming from me. There were 10 people like Jason that I reached out to. The founders had their personal networks. Every employee had their personal network. So leveraging personal networks I think is important. The next one that comes up in this category of networks is investor networks. I had a post on Twitter and LinkedIn either last week or the week prior how to leverage your investors to generate new customers. This is something that is important on when you're a seed or series a stage company in early I remember at Brex when we started moving up market YC was hugely influential in our ability to win DoorDash and this is true five, six years in the business when the business was much larger and just conceptually continuing to leverage your investor network. Far higher ROI than sending DoorDash's CFO an email from an SDR. And then the last one which isn't necessarily outbound but I think in this category of leveraging networks leverage your customers and first of all you have to deliver this delightful experience is a bit of a cliche but those who you know are your happiest promoters tweeting, referring you customers make sure that you take care of those customers and try and have a strategy around leveraging your existing happy customers to create new ones. The second thing that comes to mind is giving away giving your target something of value. I'm going to give one quick example. Open Store is a founders fund portfolio company. I work closely with the go to market team. There few sales folks and we are ab testing a few different ways of doing outbound. I have talked about this campaign that we did at Brex and there there's a tweet about that if interesting and here's the interesting thing that we're finding they're selling the E commerce, we have a few different tests that we are going through. One is just purely cold outbound. One is we are sending an email confirming the address to send them a bottle of champagne. It started with enjoy with your family on Thanksgiving. It moved to celebrate the new year and now we have enjoy with your significant other on Valentine's Day. So just come up with an excuse to send somebody a bottle of oeuvre clicquot for $45, ask them to confirm their address and that's the like second option for the A B test. And then the third option, they're going to these to e commerce websites. They're buying the product, they're sending emails with pictures of them with the product. If they sell swimsuits, they've got the swimsuit on and the conversion rates, what I described as the offering to send them a bottle of champagne, they're exponentially higher even than buying the product that the E commerce company is selling. And so I think just reinforcing this idea of if you send something of value that stands out, something that people want, you're creative about messaging. Enjoy this bottle of champagne with your family at the Thanksgiving table. We know how hard it is to run an early stage e commerce business and we're cheering for you that converts to meetings and ultimately to closed customers. Supplement your outbound potentially with something like that for high value target customers. The last one is combining outbound with some brand tailwinds examples here at Rex we put billboards up all over San Francisco when we launched the product. We specifically targeted companies that were their headquarters, their offices were in downtown San Francisco. We got countless responses to our cold outbound emails that were like we see your billboards everywhere and they don't reply. If we aren't trying to take advantage of the billboard investment that we made. Another example around these brand tailwinds. When you have PR around things like a fundraise. I remember whenever Brex would do a fundraise announcement we would incorporate that in some way into messaging and people were just gravitated more towards the business as we were realizing success milestones and try and take advantage of a fundraise both on social but then also in the timing with which you are outbounding. And then the last one is around coordinating with marketing where you're leveraging things like somebody from this account or this person visited our website. That's a good time to have SDR reach out to that person. If you have some data that's tracking their website Visits. So again, just coordinating marketing efforts into your outbound process is the third category of things that I see actually working compared to this sort of spray and pray. I'm going to email this person I've never met and they don't know who I am or anything about our company. Lots of conversation already buzzing. Jason, you have a question that actually a lot of people are chiming in on regarding about prospecting and getting people to be motivated for it. So you want to jump in?

Yeah, Sam, I love the idea and I've watched it of the A's prospecting my life experience myself and across a number of my portfolio companies that maybe aren't Brex is they won't do it. What they'll do is you'll give them a couple names, go after Enrique and go after Olivier, they'll do two or three again and. But they won't do it for real and they don't generate any real revenue. And I think they don't do it for several reasons. Right. Including DNA. But also I think sales reps want to do about the certain amount of work to hit their quota and then think about doing more work. And that's. I'm not sure it's consistent with the least energy, least effort path to quota attainment. So how does that work in practice? Do you yell at people? Do you give them quota? Do you fire them if they don't? Do you have, do you micromanage them doing it if they don't want to do it? Because I don't think 90% of AES want to want to do anything but handle a hot inbound.

Yeah, of course.

Sorry 93, I was wrong.

You are spot on. One thing that I will acknowledge I really struggle with when I work with portfolio companies or companies broadly is I haven't figured out a repeatable way of taking an existing sales organization where the AES are not doing outbound, so slightly more mature. It's called a mature sales organization where the AES don't really do outbound. They rely on marketing and they rely on sdr. I think it is very difficult, close to impossible to take that existing team of AES and get them to start all of a sudden being really effective at outbound. And so the answer that the ship may have sailed for many folks, but the answer at least at Brex and the answer that I provided as guidance or advice for early stage companies is this has to be ingrained in the culture from day one.

Yeah, makes sense.

And Jason, you this wasn't directly your question, but I think potentially it related you asked something like do you micromanage on outbound metrics? Do you fire people? Like how do you approach AES that aren't doing this? Here's how I think about it. I measure the success of let's say AE specifically but oftentimes salespeople more broadly on on three different metrics. The first, very intuitive is around performance and sales is very objective. You see who is at the top of the leaderboard and who is at the bottom of the leaderboard. And top performers are almost definitionally successful. I think the two other things that I use to track and measure success don't require skill at all. They're effort and attitude. And if there is somebody on the AE team who and I would define this as in the bottom 50% so below average, the bottom half of the team, anybody that is in that category, I then go a layer deeper and start looking into specifically effort and attitude also. But in this example, effort and what is not acceptable for me as a leader is somebody who is not performing and then either not putting in the effort or not bringing their best selves to work, not being a positive influence on the rest of the team. And you talked about micromanagement, Jason. I do. I don't know that I like the term but for the bottom half of the team, I know what they are doing, I know how they are spending their time. And yes, if there is a lack of effort on the outbound side, it's like a one time conversation like the performance isn't there, the effort isn't there. What are we doing?

Good answer.

Thank you. Thank you so much for having me.